A year ago this week, I wrote a column, titled “Push for Pension Reform Must Continue,” in which I explained my support for a pension reform proposal that would have moved elected officials, including current and future legislators, out of their current defined benefit retirement plans and into defined contribution, or 401(k)-type pension plans. The vast majority of individuals in the private sector have defined contribution plans, while those who work in the public sector have much more generous defined benefit plans. I argued that elected officials needed to lead by example by switching to defined contribution plans.
I recently voted for a pension reform plan that reflected my commitment to leading by example. The plan, which passed both chambers of the General Assembly before Gov. Tom Wolf vetoed it, would have moved all House and Senate members, including incumbents, to hybrid 401(k)-style and cash balance plans upon election or re-election. In addition to legislators, only new state employees hired after Jan. 1 of next year and public school employees’ hired after July 1 of next year would have been placed in the defined contribution retirement system.
The proposal would not have affected current retirees’ benefits. Current public school and state employees would have kept their current pension plans; however, their final average salary would have been calculated in a manner intended to prevent artificial spiking of retirement compensation, and the portion of lump-sum retirement payments derived from future service would have been adjusted to eliminate an interest rate bonus provided under current law. The legislation would not have affected state police, state law enforcement officers and corrections officers.
Pension reform is desperately needed because the Commonwealth’s two state pension systems are currently more than $50 billion in debt. It would cost each Pennsylvania household $13,000 to eliminate this debt today. Without significant legislative action to address this problem, taxpayers will be forced to pick up the growing tab, property taxes will continue to rise, and state spending on core government functions – including payments to public school and state employees’ pensions – will be in jeopardy.
It is therefore remarkable that Gov. Wolf would oppose a proposal to move legislators and only new public employees and into a 401(k)-style retirement plan which he, himself, adopted for his employees at the Wolf Organization. Clearly the governor believes this type of plan, which is common in the private sector, is adequate for most hard-working Pennsylvanians, but not for legislators or members of public employee unions.
Our growing pension debt was a threat to Pennsylvania’s financial security last year, and it is an even bigger threat today. The General Assembly recognized that our current public pension systems are unsustainable and took appropriate action. The plan that the governor vetoed would have addressed the structural issues with public school and state employees’ pensions, including legislators’ pensions, without increasing the tax burden on our families. These reforms are necessary to ensure that current retirees, as well as current and future employees, are able to enjoy a fair and competitive retirement. I remain committed to tackling this problem so that we can move Pennsylvania forward.
Representative Steven Mentzer
97th Legislative District
Pennsylvania House of Representatives
Media Contact: Jonathan Anzur